Law360 (May 7, 2020, 2:48 PM EDT) -- The board of directors for blank check company Far Point reversed course Thursday and recommended against a €2.3 billion ($2.56 billion) merger with tax-free shopping and payments company Global Blue, citing the private equity-backed group's financial difficulties partly due to the COVID-19 outbreak and questioning its ability to continue after a deal.
In a filing with the U.S. Securities and Exchange Commission, Far Point Acquisition Corp. said that due to financial difficulties with Switzerland-based Global Blue, including from the economic crisis caused by the deadly novel coronavirus, it no longer believes the merger is in the best interests of its shareholders and urged them against approving the deal.
"Based on its assessment of information received from Global Blue, there is a likelihood that Global Blue will lack sufficient capital and liquidity to fund its operations and satisfy its financial obligations following the closing of the transaction," Far Point said in its filing.
Blank check companies, also known as special purpose acquisition companies, or SPACs, are shell entities that raise money through initial public offerings in order to acquire private businesses and take them public.
SPACs have a time frame, usually 18 to 24 months, to complete an acquisition with an operating company. SPACs are seen as a low-risk proposition for investors, who can vote to redeem their shares and get their money back if they oppose the deal.
Far Point said Thursday that the current value of the deal with Global Blue is now far less than what it expected when its board of directors approved the transaction.
In a statement in response, Global Blue Group Holding AG said it believes a majority of Far Point shareholders believe the transaction is still in the interests of both sides and said rejecting the deal would likely result in a liquidation of the SPAC under Far Point's charter.
"We will continue to work constructively toward closing the transaction and remain ready to work with FPAC to resolve any reasonable post-closing liquidity concerns," Global Blue said in its statement.
In January, Global Blue and other investors announced plans to list it on the New York Stock Exchange through a merger with Far Point.
Global Blue, owned by Silver Lake and Partners Group, said it was to go public by combining with Far Point, which is co-sponsored by Third Point LLC and former NYSE President Thomas W. Farley.
As part of the transaction, Far Point and a group of new investors said at the time that they'd invest a total of $1 billion in Global Blue to value it at €2.3 billion. That investment included $650 million from Far Point, $125 million from Ant Financial Services Group, and $225 million from a group led by Third Point. Silver Lake and Partners Group would remain shareholders in the combined company.
Global Blue said it provides tourists with a shopping and payment platform that on an annual basis connects about 29 million international travelers with more than 200 payment providers and acquirers.
In its filing Thursday, Far Point said it would elaborate on its decision against recommending the merger in its proxy statement and would call a shareholder vote on the deal when practicable.
In June 2018, Far Point raised about $633 million in its IPO and said at the time it aimed to acquire a fintech business.
A spokesperson for Global Blue declined to comment beyond its public statements, and a representative for Third Point declined to comment.
A Far Point representative did not immediately respond to a request for comment.
--Additional reporting by Tom Zanki and Chelsea Naso. Editing by Abbie Sarfo.
For a reprint of this article, please contact firstname.lastname@example.org.